Behind the scenes in Detroit business

Private equity should be a bigger source of local philanthropy

First, The Wall Street Journal reported on Feb. 28 that Stephen Schwarzman's 2014 payday was $690 million. In fact, compensation for Schwarzman, co-founder and CEO of New York's Blackstone Group LP, was nearly 50 percent over the year before, the Journal reported, and was the "highest annual payout ever notched by a founder of a publicly traded private equity firm."

Second headline: Our sister publication, Crain's Chicago Business, reported last week that Blackstone was in talks to buy Chicago's tallest building, the Willis Tower. And that the sale price could be $1.5 billion. If it closes, it would be only the fourth time outside of New York that such a price was reached in the United States.

Clearly, Blackstone is on a roll. And so are a lot of other private equity firms that buy and sell companies in metro Detroit as well as around the world. Carlyle Group, Cerberus Capital Management, Elliott Management Corp. and Wynnchurch Capital are among the funds that have bought, managed or sold Michigan companies. They have billions of dollars under management. Lately, auto suppliers seem to be among the targets for acquisition.

Most of the PE firms have foundations and giving programs. But where do the philanthropic dollars go? A cursory look at their websites yields a clue: New York, where the partners live, or programs that support entrepreneurship or MBA scholarships. Actually, in checking with some experts in philanthropy, there's not a lot of data on the philanthropy patterns of private equity firms.

But what if private equity contributed philanthropic dollars to regions where it makes its profits? Companies in the so-called "fly-over" states (i.e., Michigan and Midwest) have helped to create wealth for dozens of financial titans.

Blackstone has made a big commitment to training and hiring military veterans. And it made a sizable gift when its Vanguard Health bought the Detroit Medical Center in 2010 when it funded student entrepreneurship programs at Wayne State University and Walsh College. But that interest has waned since Vanguard sold the DMC to the publicly traded Tenet Healthcare Corp. in 2013.

In metro Detroit, private philanthropy has led the way on many critical, game-changing investments, from the remaking of Detroit's riverfront to the M-1 Rail to the creation of the "grand bargain" that liberated the Detroit Institute of Arts.

The "usual suspects" may be feeling tapped out. Imagine if new sources of philanthropy were found.